August 22, 1988by Peter Grant — Crains New York Business
Circle Line Sails to Top With Dinner Cruise Deal
Circle Line Sails to Top With Dinner Cruise Deal
New York, NY, US — In one of the most far-reaching deals on the New York City waterfront in years, Circle Line Sightseeing Yachts Inc, is purchasing World Yacht Ltd., the company that has developed harbor dinner cruises into a multimillion-dollar business.
The price of the acquisition is about $35 million, according to World Yacht officials.
The transaction, which is in its final stages of negotiation, will give undisputed dominance in the cruise business to Circle Line, whose boat trips around Manhattan have become one of the city's leading tourist attractions. World Yacht, with five ships, has been the biggest competitor of Circle Line, which has a fleet of nine cruise vessels. Both are based in Manhattan.
Karl Andren, the owner of Circle Line, acknowledged last week that he is planning to buy World Yacht, but he declined to go into much detail because the deal has not been finalized. He says that World Yacht would operate as a "totally independent" subsidiary.
"It's a very natural expansion of the Circle Line range of products," Mr. Andren says.
August Ceradini, the general manager of World Yacht, says that the timing of the deal depends on the financing, which is being provided partially by General Electric Capital Corp. But he acknowledges that most of the details of the transaction have been worked out. "There is a mutual understanding," he says.
The premium that Circle Line is paying for World Yacht reflects the strength of the dinner cruise business. Five years ago, only one commercial dinner cruise vessel was plying the harbor's waters. This summer, on any evening as many as 2,700 diners, paying $50 to $100 a meal, might be found admiring the city from the decks of eight ships run by three companies.
World Yacht last year had about $20 million in sales, up from about $10 million in 1986, Mr. Ceradini says. Officials of the other two cruise lines — The Spirit of New York, which is run by Cruise Ventures Inc., of Norfolk, Va.; and Seaport Harbor Cruise Line, a subsidiary of Manhattan-based McAllister Brothers Co. — declined to comment on sales.
The growing appeal of the cruises has cut into the city's restaurant businesses, particularly those that are popular with tourists, says Cynthia Darrison, the executive director of the Restaurant League of New York. "If World Yacht is sending out five ships at dinner, that's how many people are not eating at midtown restaurants," she points out.
Dinner cruises , with their elegant meals, soft music and occasional cabaret-style entertainment, also have begun to take customers away from the Circle Line, industry officials say. Increasingly, passengers need more than a deck chair and a soft drink to appreciate the waterfront.
In recognition of this trend, Circle Line this year stopped running its daily cruises from the city to Bear Mountain. Instead, the company vessel that had been making the Day Line trips is being used primarily for charters. Circle Line also has begun operating specialized trips such as its weekly rock-and-roll tour.
The acquisition of World Yacht is just the latest coup for Mt. Andren, who got into the ships business in 1974 when he purchased a small tag-and-barge company in New York harbor. A Swedish national who never shook his childhood affection for boats, he tried to buy the Circle Line for years. The original owners of the fleet finally gave in and sold him the Circle Line for an undisclosed amount in 1981, soon after he had begun planning a competing line.
Stubbornness also paid off for Mr. Andren in the World Yacht deal. When he first approached the owners four months ago, they were not interested. "Actually we were thinking about buying Circle Line at the time," Mr. Ceradini says. "But he's persistent."
Mr. Andren says his interest in World Yacht stemmed partly from the "maturity" of the Circle Line business. The ridership of the line, which has leveled off at about 1 million passengers a year, rises and falls depending on the health of city tourism.
The purchase of World Yacht, however, has several potential hazards. The new owner may face labor problems with non-union employees working for the dinner cruise operation. The employees may feel that the unionized staff at Circle Line receives superior wages and benefits.
Concern for the future
A bigger concern is the future of the lease that World Yacht holds on three state-owned piers at the foot of West 23rd Street. The lease expires in 1992 and it is by no means certain that it will be renewed. The piers are in area being supplied by city and state officials working on an alternative to Westway, the controversial $2 billion highway and development project that was abandoned in 1985.
Lease is for interim use
"It was made clear to all parties when the World Yacht lease was negotiated that it was for interim use, pending a long-term decision on the use of the whole waterfront area," says a state Transportation Department spokeswoman.
The World Yacht was formed by Neil Heap and Peter Simonetta, two travel industry executives, in 1969 as a brokerage that chartered private yachts for group excursions. The company began building its own fleet in 1983, after it was joined by John Connelly, a Pittsburgh millionaire who eventually took control of the partnership.
© Crain Communications Inc. 1988